Cycle trading update 2 September 2016

Good morning traders,

Summer quiet on the stock markets is still not completely over, so I can keep it fairly short today.

The day chart of the German Dax looks bullish. We can observe a clear upward trend and the latest correction is very small compared to the latest upward impulse. Corrections in time are always bullish (of course as long as they take place in an upward trend).

It’s a little unclear at which day of the cycle we are now. If I use the lowest price I count the eighth day, but if I use the lowest level of long Double Stochastic, we are just in the third day. The latter can be better compared to the stock markets in the US. Anyway, the Dax is on its way to test the previous high and normally we can expect a breakthrough with 11000 as target price. The alternative scenario is that no or hardly a new high will be formed after which the price significantly falls back from that level. That would be a signal to reduce long trades.

The Bund. Should we spend time here? At least not too much time, because it is easy to see that the price is locked in a trading range between 165.50 at the bottom and 168 at the top. We can even say that the bottom is getting narrower if we use the ascending MA bands as a border. This means the following: a period of decreasing volatility is usually followed by a period of greater volatility. Large movements are preceded by a period of tranquillity. If we now break below 166.50, it could be the first step towards a larger decline. If the Bund breaks above 168, it creates a signal for a further increase to 170 and above. Looking at the current day cycle, we now count the twelfth day. Perhaps the end of this cycle will be more spectacular, but we first have to wait for a breakout of the 166.90-60 zone.

The strong upward trend of gold for the second time is interrupted by a large correction. The first time was during the period from mid-February to early June of this year and the current correction (largely a correction in time) has also been going on for a month or two. It is important that the gold price will quickly find support around this level. If not, then it means that the uptrend is broken, and we will need to focus on a lower top and look for possible short sales. The price should bottom in the next day. In terms of cycle count this could happen, but we must wait for a trigger for possible longs. This trigger should then clearly indicate that the market is turning (for example, a bullish pinbar), so that we have a good reference for a stop loss.